WASHINGTON (AP) — The U.S. economy grew at a surprisingly strong 4.3% annual rate in the third quarter, the most rapid expansion in two years, as government and consumer spending, as well as exports, all increased.
U.S. gross domestic product from July through September — the economy’s total output of goods and services — rose from its 3.8% growth rate in the April-June quarter, the Commerce Department said Tuesday in a report delayed by the government shutdown. Analysts surveyed by the data firm FactSet forecast growth of 3% in the period.
However, inflation remains higher than the Federal Reserve would like. The Fed’s favored inflation gauge — called the personal consumption expenditures index, or PCE — climbed to a 2.8% annual pace last quarter, up from 2.1% in the second quarter.
Excluding volatile food and energy prices, so-called core PCE inflation was 2.9%, up from 2.6% in the April-June quarter.
Economists say that persistent and potentially worsening inflation could make a January interest rate cut from the Fed less likely, even as central bank official remain concerned about a slowing labor market.
“If the economy keeps producing at this level, then there isn’t as much need to worry about a slowing economy,” said Chris Zaccarelli, chief investment officer for Northlight Asset Management, adding that inflation could return as the greatest concern about the economy.
In a slow holiday trading week, U.S. markets on Wall Street turned lower following the GDP report, likely due to growing doubts that another Fed rate cut is coming next month.
Consumer spending, which accounts for about 70% of U.S. economic activity, rose to a 3.5% annual pace last quarter, up from 2.5% in the April-June period.
Consumption and investment by the government grew by 2.2% in the quarter after contracting 0.1% in the second quarter. The third quarter figure was boosted by increased expenditures at the state and local levels and federal government defense spending.
Private business investment fell 0.3%, led by declines in investment in housing and in nonresidential buildings such as offices and warehouses. However, that decline was much less than the 13.8% slide in the second quarter.
Within the GDP data, a category that measures the economy’s underlying strength grew at a 3% annual rate from July through September, up slightly from 2.9% in the second quarter. This category includes consumer spending and private investment, but excludes volatile items like exports, inventories and government spending.
Exports grew at an 8.8% rate, while imports, which subtract from GDP, fell another 4.7%.
Tuesday’s report is the first of three estimates the government will make of GDP growth for the third quarter of the year.
Outside of the first quarter, when the economy shrank for the first time in three years as companies rushed to import goods ahead of President Donald Trump’s tariff rollout, the U.S. economy has continued to expand at a healthy rate. That’s despite much higher borrowing rates the Fed imposed in 2022 and 2023 in its drive to curb the inflation that surged as the United States bounced back with unexpected strength from the brief but devastating COVID-19 recession of 2020.
Though inflation remains above the Fed’s 2% target, the central bank cut its benchmark lending rate three times in a row to close out 2025, mostly out of concern for a job market that has steadily lost momentum since spring.
Last week, the government reported that the U.S. economy gained a healthy 64,000 jobs in November but lost 105,000 in October. Notably, the unemployment rate rose to 4.6% last month, the highest since 2021.
The country’s labor market has been stuck in a “low hire, low fire” state, economists say, as businesses stand pat due to uncertainty over Trump’s tariffs and the lingering effects of elevated interest rates. Since March, job creation has fallen to an average 35,000 a month, compared to 71,000 in the year ended in March. Fed Chair Jerome Powell has said that he suspects those numbers will be revised even lower.
Roofers work atop a house in Anna, Texas, Thursday, Dec. 18, 2025. (AP Photo/LM Otero)
Ryan Gerard left his home in south Florida at 5:30 p.m. on Dec. 13 for a trip he never imagined taking this year, and one he certainly didn't regret.
He returned home nine days and some 20,000 miles later after stops that included Italy on his way to a small island off the coast of Africa, and an eight-hour layover in Paris on the way back that gave him enough time to see the Arc de Triomphe and the Notre-Dame Cathedral.
“I am looking at the Eiffel Tower,” Gerard said by phone Monday afternoon. “Pretty sick.”
Oh, and along the way he picked up an invitation to the Masters.
That green envelope — Augusta National doesn't do evites — might not be there right away. The final Official World Golf Ranking for the year isn't published until Sunday, and the 26-year-old Gerard will check in at No. 44.
And it's all because of his decision to play one more tournament, even if that meant flying over the Atlantic Ocean, the Mediterranean Sea, the Red Sea and the Indian Ocean to get to the Mauritius Open, the final tournament this year on the European tour and Sunshine Tour schedule.
Despite some 36 hours of travel — he got to his hotel at 1 p.m. Monday local time — Gerard opened with rounds of 68-69 and was tied for fifth. He was No. 57 in the world and needed a two-way tie for fourth to crack the top 50.
“I figured I’d have one more crack at that and give it my best shot,” he said after the second round. “Then I could hang my hat on giving it my all for the season, and the top 50 by the end of the year to get into the Masters. So that’s kind of a kick in the pants to come 10 000 miles from Florida and tee it up. It wasn't on the Bingo card at the start of the season, for sure.”
And then bingo! He posted a 63 at Heritage La Reserve Golf Links the next day to take the lead. On Sunday, he wound up in a playoff with scorching hot Jayden Schaper, the South African who has won the last two tournaments by making eagle in a playoff.
In Mauritius, Schaper holed out from about 60 yards short of the green for eagle to beat Gerard.
“I would have loved to win,” Gerard said. “But it was an unbelievable shot. He flew it perfect. Two hops, check, use the side slope and just trickled in. Hats off to him. He's been playing great golf. Back-to-back weeks where in a playoff he's made eagle from off the green to win it.
“I don't really know how often that happens,” he said with a laugh, "but it seems pretty rare.”
The consolation for Gerard was a big one — his first Masters.
Augusta was on his mind when Gerard played the RSM Classic at Sea Island last month — the final PGA Tour stop of the year — when he was No. 49 in the world. And then he missed the cut.
“I was looking Friday afternoon and was like, ‘Hey, does it make sense to go do anything?’ I was going to try to play the Nedbank (in South Africa), but the tournament deadline was the day before I missed the cut," Gerard said.
The Alfred Dunhill was out because that was the weekend his good friend and former North Carolina teammate Ben Griffin was getting married.
Last on the list was Mauritius. He had heard enough about Mauritius from Christo Lamprecht of South Africa that he checked the schedule, did the math and signed up.
Gerard had already done a fair bit of traveling after he narrowly missed out on the Tour Championship. He played in Ireland and England, Japan and Abu Dhabi. Clearly, he's willing to travel. This summer, he flew across eight time zones from Scotland to Lake Tahoe and then won the Barracuda Championship for his first PGA Tour title.
What's another trip with so much on the line?
Key to this tale was that win at the Barracuda Championship, the same week as the British Open. As an opposite-field event, it did not come with a Masters invitation. But it was co-sanctioned by the European tour, and that gave access to those events.
“I guess I realized it,” he said of his European perk. “I just didn't realize how impactful it might be.”
Chasing points of any variety can be dangerous in golf. Griffin, for example, played 13 consecutive weeks early this year in a bid to make the Masters (he fell just short).
There also was the case of Brandt Snedeker, who in 2017 missed five months with a sternum injury and watched his world ranking plunge. He ended the PGA Tour season at No. 50 in the world and then started sliding.
Snedeker, much like Gerard did this year, flew halfway around the world to play in the Indonesia Masters. It didn't have the same happy ending — Snedeker was near the cut line when he had to withdraw after the second round with heat exhaustion and dehydration.
Gerard wasn't down to his last chance. He would have had three months to start 2026 to either win or do well enough to get into the top 50, but he saw an opportunity.
“Figured I got nothing better to do,” he said. “It seemed like a cool thing, made sure it worked logistically and just went for it.”
On The Fringe analyzes the biggest topics in golf during the season. AP golf: https://apnews.com/hub/golf
FILE - Ryan Gerard hits from the ninth tee during the first round of the BMW Championship golf tournament, Aug. 14, 2025, in Owings Mills, Md. (AP Photo/Nick Wass, file)
FILE - Ryan Gerard watches his tee shot on the second hole during the second round of the PGA Championship golf tournament at the Quail Hollow Club, May 16, 2025, in Charlotte, N.C. (AP Photo/David J. Phillip, File)
